Where Have All the Traders Gone?

As the mainstream media continues to have 24 hour coverage of Comey’s firing, investors will try to concentrate on the quieter than normal markets. On the economic front, we have a quiet week with Building Permits and Housing Starts. Of course North Korea can always saber rattle the markets by launching another missile.

Earnings Season Winds Down: 1Q Earnings season continues to wind down as we have now had over 90% of the S&P 500 report 1Q earnings. This week has 19 S&P 500 companies and 3 Dow components expected to report. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, with approx. 90% of S&P 500 companies reporting 1st quarter earnings, 63% reported revenue above expectations while 75% have reported earnings above expectations. Both of these figures are above the last 4 quarters averages. These figures are also higher than what we witnessed with earnings last quarter. The blended earnings growth estimate is now approx. 14.7%. Additionally, the S&P 500 forward PE ratio is currently at 17.7X which is also near a decade high. So on a historical basis, the S&P could potentially be considered overvalued.

Chinese Data: This week, China will be releasing Industrials Production and Retail Sales. Investors will monitor the data and the reaction from commodities such as oil in case readings are weak. We will also monitor to see if the Chinese bond sell off continues, which could have ripple effects for global markets sending them lower.

13F Filings: By this Monday (5/15), all institutions with $100M in assets under management have to file their 3/31 ownership positions. Should some well-known investors declare new sizable positions in a certain company, we can expect that stock to have a bump higher. For example, when Berkshire Hathaway filed a position in the airlines last fall, the sector moved up over 3% the next day.

OPEC: In a laughable request, OPEC asked major oil producers such as the US not to pump so much oil to keep prices artificially higher. The reason behind this is the markets over supply of black gold, which has sent prices to below $50 per barrel. OPEC is scheduled to meet in Vienna and make a formal statement on May 25th. Investors will be watching for statements leading up to this meeting regarding potential agreements to extending output cuts for another 6 months. For the days leading up to the statement, any headline whether they have an agreement or not will send the price of oil higher or lower.

VIX: Last week, the VIX, a measurement of volatility was at 9.56, its lowest level since 1993. It has now been 14 days in a row that the VIX has closed below 11, an all-time record. Traders will continue to watch if this record low volatility continuous, or if some catalyst comes in pushing it higher. But as long as the markets believe that central banks will step in with any downturn, we likely won’t see a spike any time soon. So much for a free market.

Wildcard:The latest missile launch out of North Korea has futures lower across the world. Investors will continue to monitor the latest out of the situation. Additionally, this cyber attack that hit roughly 150 countries on Friday (5/12) may continue to affect countless computers across the world. Traders will continue to monitor the latest developments. If these wildcards do not pan out, expect volumes to continue to be light.